Media reforms have bets running hot

Regional media companies
Prime Media Group
and
Southern Cross Media
are expected to be the first participants in any shake-up of the media sector triggered by the recommendations of the Gillard government’s convergence review.

The report recommends the scrapping of all media ownership controls except the “voices" test, which is designed to ensure a diversity of media ownership in each market.

The number of “voices" per market was not detailed, but the system would be expanded from three media – newspapers, radio and free-to-air TV – to all media.

Media acquisitions and mergers would be subject to a “public interest test" to ensure competition was not significantly reduced, and the media sector would fall under the control of a new “super" regulator.

The three-person convergence committee recommended ditching the “two out of three" rule – which stops one company from owning newspaper, radio and free-to-air TV businesses in a single market – and removing the “audience reach" rule, which prevents a TV network from owning stations that reach more than 75 per cent of the national population.

Media industry executives would not discuss publicly the changes that could happen if the draft report’s recommendations were introduced.

“It’s far too early to talk about what might happen or comment in detail on the draft report," said one senior media executive, who did not want to be named.

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“It’s a very short report [22 pages] and it’s far from clear how a lot of its recommendations would be implemented, assuming they make it into the final report and then through the government review process."

Communications Minister
Stephen Conroy
had already flagged an end to the “audience reach" rule, which was widely expected to trigger a bid for
Paul Ramsay
’s
Prime Media
by
Kerry Stokes
’
Seven Group Holdings
and a merger of
Ten Network
and
Southern Cross Media
.

Seven Group already owns 11.4 per cent of Prime, which buys most of the programs for its regional TV network from Seven.

Southern Cross’s regional TV division buys programming from Ten. The former also owns capital-city radio stations such as 2Day, 3Fox and the Triple M network, which – like the main Ten TV channel – are mainly aimed at people aged under 40.

“It would make a lot of sense for Ten and Southern Cross to get together," one industry source said. “Neither can afford a full takeover, so a merger would be logical."

Removing the “two out of three" rule would enable companies such as
Fairfax Media
(the publisher of The Australian Financial Review) and
Seven West Media
(which is controlled by Seven Group) to add more assets, although media analysts pointed out that both companies were carrying a large amount of debt.

Any potential expansion plans by Fairfax, Seven West, Rupert Murdoch’s
News Corp
and others could be stymied by the proposal to pull all media into the “voices" system. News Corp, for example, operates in just one sector covered by the existing media rules: newspapers. But the new rules would take in its interests in magazines, pay TV and the internet.

Media executives were surprised by the draft report’s proposal to let individual companies own more than one TV licence per market and more than two radio licences per market.

“There is no way the Australian Competition and Consumer Commission would allow that to happen," a media executive said.